Pestel Analysis Russian Federation Essay

3401 Words Oct 14th, 2012 14 Pages
4.1.1 PESTEL Analysis
This part of the dissertation will analyze main political, economic, social, technological, environmental and legal issues within the Russian Federation. All of the Interviewees outlined the political aspect as the most important when investing into Russia, however the Author would like to acknowledge that the economical and legal factors have a critical weight in the issues of FDI, therefore their analysis will play a comprehensive role in the thesis, assuming that the initial reader has no background knowledge of the environment. Please refer to section titled Analytical Tools (3.2.3) for the theoretical underpinning of the model used.

PESTEL Analysis

◊ New democracy
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Gross Domestic Product: Alan C. Shapiro (Multinational Financial Management, 2010) states that the lasting levels of FDI have a direct impact on GDP, the evaluation of the degree to which political factors (such as corruption) have had an inverse effect on the levels of FDI as clearly seen within the Russian economy. The Gross Domestic Product of the Russian Federation is split into the following sectors:
Chart 2

Overall since Putin’s presidency has seen a stabilized trend in economic development through the increase in energy prices, nevertheless the dependence on energy exports is proving to have a negative impact on future economic progress. Majority of the revenues come from the export of natural resources, which according to Abelsky account for about 70% of the GDP (‘Russia Sees Oil’, Bloomberg, 2010).

Table 4 GDP Growth Rate in %
GDP Growth 2005 2006 2007 2008 2009
GDP growth USA 3.1 2.7 1.9 0 -2.6
GDP growth Russia 6.4 8.2 8.5 5.6 -7.9

The issue of dependency on oil and gas exports questions the sustainability in the development of economic indicators overall (Havlik, 2010). The correlation between GDP and energy prices (Table 10) can be clearly verified through the years 2008-2009, when the global credit crisis lowered the demand for oil (and the price fell by $35.9/barrel) and Russian GDP contracted by 7.9%. Even though the government responded quite quickly to the crisis, by supporting the currency and the financial

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